Chip Starnes, co-founder and president of Specialty Medical Supplies China, had been trapped in the company's suburban Beijing factory since Friday.

Starnes reached an agreement with the workers after a pay dispute. Officials said 97 employees signed a new compensation agreement.

On Tuesday, Starnes told CNN's David McKenzie from behind the factory's gates that he was being held hostage.

"I tried to leave a day and a half ago, and there was like 60 or 70 of them here inside every entrance, and every exit was barricaded," Starnes said. "I can't go anywhere."

He said workers had hindered his sleep by banging on doors and windows, but said they had not inflicted any physical harm.

The dispute

The incident started when the company laid off about 30 workers in its injection molding division. He said he transferred workers to another division, but some workers did not want to move. So the company gave them severance packages.

Starnes said the problem arose when workers who already moved to another division also wanted severance packages.

But workers who spoke to CNN from behind the factory gates gave an entirely different account. Some said they're owed two months' worth of back pay and feared everyone at the plant would be laid off, as they claimed no new materials had entered the factory.

Starnes disputed that, saying there are no outstanding balances and that the workers had heard bad information.